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Reclaiming Motion by Nadeem Sarwar against Phlo Technologies LTD and others (Court of Session)
Smart Summary
Factual and Procedural Background
The Plaintiff was founder, director and majority shareholder of Company A. The Plaintiff and Company A entered into a service agreement dated 13 February 2018 ("2018 Service Agreement"). There is a factual dispute about whether the Plaintiff and Company A entered into a subsequent service agreement dated 6 March 2020 ("2020 Service Agreement"), a Consultancy Agreement dated 23 June 2018 and a Non-Executive Director's Agreement dated 23 March 2020. The Plaintiff avers that on 30 August 2024 the Defendants purported to terminate the 2020 Service Agreement by summarily dismissing him. The Plaintiff sought a declarator that the purported termination was null and void and interdicts concerning shares and termination of the Consultancy Agreement and the NED Agreement.
Company A carried out various funding rounds. In March 2024 a subscription agreement (the "2024 Subscription Agreement") was entered into between certain Investors, an investment manager, the Plaintiff and Company A. The Plaintiff and Company A jointly and severally gave warranties in favour of the Investors in that agreement. The Defendants pled pleas-in-law of waiver and of personal bar based on those warranties. At first instance, the commercial judge dismissed the action at debate without hearing evidence. The present reclaiming motion challenges whether the commercial judge was entitled to dismiss at debate without hearing evidence.
Legal Issues Presented
- Whether the commercial judge was entitled to dismiss the action at debate without hearing any evidence.
- Whether the Defendants' pleas of implied waiver and of personal bar could be determined on the pleadings alone (i.e. without leading evidence), given the contractual warranties and the Plaintiff's averments about disclosure.
Arguments of the Parties
Plaintiff's Arguments
- The commercial judge was not entitled to decide waiver and personal bar at debate without hearing evidence; the Plaintiff's pleadings did not support a conclusion of unequivocal abandonment of rights.
- The Defendants had not averred facts showing they had conducted affairs in reliance on a belief induced by the Plaintiff's conduct, as required in some authorities.
- The Plaintiff's averments about pension disclosure and a shareholders' agreement reference to a subsequent service agreement could undermine any finding of waiver; the Company could not plead waiver based on Investors' reliance.
Defendants' Arguments
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| James Howden v Taylor Woodrow 1998 SC 853 |
Statement by Lord Kirkwood that, if reliance is necessary, the claimant must have believed the right had in fact been waived. |
The court treated Lord Kirkwood's statement as fact-specific to that case and declined to apply it as a universal rule; left open the statement's general application. |
| Armia v Daejan 979 SC (HL) 56 |
Objective test for implied waiver and the description of waiver as fact-sensitive ("difficult to describe but easy to recognise"). |
The court relied on the Armia authorities to emphasise that implied waiver arises from conduct seen in its factual context and is usually fact-sensitive, typically requiring evidence. |
| Mactaggart & Mickel Homes Limited v Hunter [2010] CSOH 130 |
Explanation (Lord Hodge) that implied waiver arises from actions viewed in factual context and that waiver is usually a matter of fact; reliance is usually required. |
The court adopted this analysis to conclude that waiver is fact-sensitive and that proof will normally be required before concluding waiver. |
| Jamieson v Jamieson 1952 SC (HL) 44 |
Principle that a claim may be dismissed on pleadings only if the defender shows that even if all averments are proved the pursuer's case must fail. |
The court applied this test and held the Jamieson threshold was not met: the Defendants had not shown that the Plaintiff's averments, if proved, would inevitably fail. |
| Presslie v Cochrane McGregor Group Ltd 1996 SC 289 |
Authority cited in the context of the role of reliance in implied waiver. |
The court treated Presslie as supporting the proposition that courts usually look for reliance induced by conduct when considering waiver, but emphasised context matters. |
| Gatty v Maclaine 1921 SC (HL) 1 |
Authority referenced in relation to the doctrine of personal bar. |
The court noted the commercial judge relied on such authorities in support of personal bar but held that personal bar, like waiver, is fact-sensitive and requires proof in context. |
| Lousada & Co v Lesser (Properties) 1990 SC 178 |
Cited by the Plaintiff on the need for averments of facts supporting reliance by the other party. |
The court noted the Plaintiff's reliance on this authority to argue that the Defendants had not averred requisite facts of reliance; held the point required evidence. |
Court's Reasoning and Analysis
The court reasoned that implied waiver and personal bar are inherently fact-sensitive. It reiterated authorities establishing that waiver is assessed objectively by reference to conduct in its factual context and that courts usually look for evidence that the other party acted in reliance on a belief induced by that conduct.
The court held that dismissal on the pleadings without hearing evidence is permissible only in rare cases where the defender shows that even if the pursuer proves all averments the case must still fail (Jamieson). This was not such a case.
On the specific contractual material, the court observed that the warranties in the 2024 Subscription Agreement were given by the Plaintiff and Company A to third-party Investors and were subject to express limitations (caps and time limits). Those features meant that granting warranties to Investors did not necessarily constitute an unequivocal abandonment of rights between co-warrantors. The court explained that the warranties allocated risk and, given their limitations, did not on their face demonstrate that the Plaintiff had abandoned rights for all time.
The court treated the Plaintiff's averment about disclosure (the pension disclosure) as a relevant factual matter which, if proved, could undermine a finding of abandonment and waiver. The requirement of fairness (and any reliance requirement) in the co-warrantor context was novel and fact-dependent; the court declined to adopt Lord Kirkwood's statement as a universal rule.
Accordingly, both the plea of waiver and the plea of personal bar required proof. The commercial judge's determination at debate without hearing evidence was therefore set aside in respect of those pleas.
Holding and Implications
Reclaiming motion allowed; interlocutors recalled; proof before answer ordered; respondents' second plea repelled.
Direct consequences: the court allowed the Plaintiff to amend pleadings (to add an alternative case about an inquorate board meeting), recalled the commercial judge's interlocutors dated 16 July 2025, ordered a proof before answer on the amended pleadings, repelled the Defendants' second plea in law and remitted the case to the commercial judge to proceed. The opinion did not purport to establish a new general rule; the decision's immediate effect is to require that the disputed pleas be resolved after evidence is led rather than on the pleadings alone.
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